Rackspace revenue beats on growing web hosting demand

Mon Nov 7, 2011 5:31pm EST

(Reuters) - Web hosting company Rackspace Hosting Inc's (RAX.N) third-quarter revenue came in above analysts' expectations, as the demand for hosting applications rose in a sluggish macro economy.

Looking for cheaper alternatives to run their businesses, many small- and medium-sized firms are migrating to hosting their applications on the cloud. These applications run on servers and hardware provided by companies like Rackspace, instead of their own, which saves significant costs.

This demand for hosting software on the cloud spurred a double-digit growth in revenue for Rackspace, which competes with Equinix (EQIX.O) and Internap Network Services Corp (INAP.O), for the fifth straight quarter.

Revenue for the July-September period rose 32.5 percent to $265 million, compared with average analysts' expectations of $261.6 million, according to Thomson Reuters I/B/E/S.

Net income was $19.9 million, or 14 cents a share, compared with $11.8 million, or 9 cents a share, a year ago.

Total server count rose 6 percent to 78,717 servers and total customers rose 6 percent sequentially.

The San Antonio, Texas-based company's shares, which have risen 33 percent year-to-date, were up 3 percent at $42.94 after the bell. They closed at $41.75 on Monday on the New York Stock Exchange.

(Reporting by Siddharth Cavale and Soham Chatterjee in Bangalore; Editing by Roshni Menon)

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